Case Name: Ama Computer College, Inc. vs.
Garcia Held/Ratio:
G.R. Number: 166703
Topic: Authorized Causes Author: Yao, Byron
Doctrine: There are three basic requisites for a valid retrenchment to exist, to wit:
(a) the retrenchment is necessary to prevent losses and such losses are proven; (b)
written notice to the employees and to the DOLE at least one (1) month prior to the
intended date of retrenchment; and (c) payment of separation pay equivalent to one
(1) month pay or at least onehalf (1/2) month pay for every year of service,
whichever is higher. To justify retrenchment, the employer must prove serious
business losses. Indeed, not all business losses suffered by the employer would
justify retrenchment under Article 283 of the Labor Code. The “loss” referred to in
Article 283 cannot be just any kind or amount of loss; otherwise, a company could
easily feign excuses to suit its whims and prejudices or to rid itself of unwanted
employees.
Facts:
 Garcia was hired as a janitress by ACC on 6 January 1988. On 15 May
1989, her employment status was changed to probationary Library Aide.
She became a regular employee on 15 February 1990.
 Balla was hired as a Social Worker by ACC on 1 August 1996. She later
became a Guidance Assistant in the Guidance Department of ACC, and on
2 June 1997, became a regular employee.
 ACC Human Resource Director, informed Garcia and Balla and 52 other
employees of the termination of their employment which was caused by
prevailing economic conditions and thus were no longer needed due to
redundancies hence they filed a case for illegal dismissal.
 Labor Arbiter ruled that Garcia and Balla were illegally dismissed and
ordered the payment of their backwages and additional separation pay.
 NLRC affirmed the assailed Decision of the Labor Arbiter with the modification
of deleting the award of 13th month pay, service incentive leave pay and cost of
living allowance.
 ACC then appealed by way of Petition for Certiorari under Rule 65 of the Rules
of Court to the Court of Appeals which was denied.
Issue:
1. Whether or not Garcia and Balla were illegally dismissed.- YES
. It must be stressed at the outset that ACC raised different grounds to justify its
dismissal of Garcia and Balla: before the Labor Arbiter, it cited retrenchment;
before the NLRC, it claimed redundancy; and before the Court of Appeals, it
averred both retrenchment and redundancy.
It is apparent that ACC itself is confused as to the real reason why it terminated
Garcia and Balla’s employment. Both retrenchment and redundancy are authorized
causes for the termination of employment. ( Please see Article 283 of the Labor
Code).
Redundancy exists when the service capability of the workforce is in excess of
what is reasonably needed to meet the demands of the business enterprise. A
reasonably
redundant position is one rendered superfluous by any number of factors, such as
overhiring of workers, decreased volume of business, dropping of a particular
product line previously manufactured by the company or phasing out of service
activity priorly undertaken by the business.
Among the requisites of a valid redundancy program are: (1) the good faith of the
employer in abolishing the redundant position; and (2) fair and reasonable criteria
in ascertaining what positions are to be declared redundant and accordingly
abolished.
Retrenchment, on the other hand, is the termination of employment effected by
management during periods of business recession, industrial depression, seasonal
fluctuations, lack of work or considerable reduction in the volume of the employer's
business. Resorted to by an employer to avoid or minimize business losses, it is a
management prerogative consistently recognized by this Court.
To justify retrenchment, the employer must prove serious business losses. The
"loss" referred to in Article 283 cannot be just any kind or amount of loss; otherwise,
a company could easily feign excuses to suit its whims and prejudices or to rid itself
of unwanted employees.
In a number of cases, the Court has identified the necessary conditions for the
company losses to justify retrenchment: (1) the losses incurred are substantial and
not de minimis; (2) the losses are actual or reasonably imminent; (3) the
retrenchment is reasonably necessary and is likely to be effective in preventing the
expected losses; and (d) the alleged losses, if already incurred, or the expected
imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence. ACC miserably failed to prove any of the foregoing.
In the case at bar, ACC claimed that the retrenchment of Garcia and Balla was
justified due to the financial difficulties experienced by the college that it was made
effective in all of its campuses and for all departments; and appropriate notices were
given to Garcia and Balla. But other than its bare allegations, ACC failed to present
any supporting evidence.
Not only was ACC unable to prove its losses, it also failed to present proof that
it served the necessary notice to the DOLE one month before the purported
retrenchment of Garcia and Balla. As also found by the Labor Arbiter, and
affirmed by the NLRC and the Court of Appeals, ACC did not give Garcia and
Balla sufficient separation pay. Falling short of all the requirements, ACC cannot
claim that it had effected a valid retrenchment of Garcia and Balla.
In sum, the Court finds no basis for disturbing the consistent findings of the Labor
Arbiter, the NLRC and the Court of Appeals that ACC was not able to discharge
the burden of proving that its dismissal of Garcia and Balla was valid.

WHEREFORE, the instant Petition is hereby DENIED.

The Decision dated 30 August 2004 of the Court of Appeals
in CA-G.R. SP No. 81808 is hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez,
Nachura and Reyes, JJ., concur.
Petition denied, judgment affirmed.